GST rate on restaurant bills slashed to 5%; pay less for eating out now

At the 23rd GST Council meeting, the decision has been made to cut GST rates on restaurants across all categories. Therefore, the GST rates on restaurant bills have been brought down to 5% from the current 18% and 12%.

Till date, the hotel and restaurant industry had been entreating the government to fix a uniform tax incidence of 12% on the restaurant across all varieties. Fortunately, after taking into account the issue, the GST Council has cut down the GST rate to 5%. Additionally, the GST Council has dissolved the Input Tax Credit (ITC) which the hotel and restaurant industry too was supposed to pay.

After much thought, the GST Council has resolved to shift 13 items from the 18% to 12% bracket, 6 items from the 18% to 5% bracket, 8 items from the 12% to 5% bracket and 6 items from 5% to nil. Finance Minister Arjun Jaitley, declaring the consensus at the Council meeting, said that there has been a decision to cut down the maximum tax incidence from 28% to 18% through the course of time considering the impact on the total revenue collections.
The Council has decided to bring into effect the new rates from November 15, 2017 onwards. Additionally, to woo the small entrepreneurs and business houses, the GST Council will boost the composition scheme threshold. Therefore, from the current Rs. 1 crore, the new composition scheme threshold shall be Rs. 2 crores.


The industry is elated and satisfied with the government for having their demands heard and heeded. “The hotel and restaurant industry has widely welcomed the GST Councils decision to reduce the GST rate on restaurants and bring it to a uniform 5%. We are extremely thankful to the government for making these much-required changes in the GST regime. This will help restaurants across India rationalise tariffs,” said Garish Oberoi, president of Federation of Hotel & Restaurant Associations of India (FHRAI). A delegation of FHRAI driven by Garish Oberoi was in attendance in Guwahati rallying for the demands of the hotel and restaurant industry.

Oberoi, however, looked anxious about the announcement about the increment in the threshold of composition scheme. He said that the new decision will hit the businesses working under the GST because the scheme will simultaneously encourage unregulated economy in India.

“I feel that having lost input tax credit, restaurants have lost the benefit but the customer has gained directly. But the government has given benefit to customers directly,” said SM Shervani, MD, Shervani Hospitality.